Trump impeached, Bank of England ahead
Discretion is the better part of valour.
Caution is preferable to rash bravery. Falstaff’s words probably can be
applied to markets as we head into the year-end. For sterling traders today we
have the double spectacle of the Queen’s Speech and the Bank of England
meeting. Caution and discretion will be the watchwords for the Monetary Policy
Committee; less so the government’s likely agenda.
GBPUSD has been steady at 1.3080 but we are seeing a
bit of bid for the pound early doors with cable taking a 1.31 handle again to
The Bank of England decision is today at midday, with no
change expected. We could see a dovish bias as the MPC catches up with the
market. Market odds of a cut next year have jumped from about 30% last week to
more than 75% today. Two dissenters called for a cut last time around, so
there is the intellectual basis to cut rates.
Nevertheless, with the election still not cold, and a new
governor about to appointed, the MPC will prefer to wait until 2020 and a
little more surety before it cuts. Moreover, the
added uncertainty that we see – reflected in the pound movements over the last
week – from the PM’s decision to shackle the government to leaving the
transition period by Dec 2020 come what may, means the BoE will demur.
It is a sign of the times when the impeachment of the
president of the United States produces nothing but a shrug. By
becoming only the third president in history to be impeached, Mr
Trump joins a select club. Markets simply don’t care.
The Republican-controlled Senate will never abandon their
president. Democrat speaker Nancy Pelosi has suggested she may delay sending
the letters of impeachment up to the Senate, but this is posturing. The
impeachment process has and remains so partisan that Mr Trump will not be
removed from office.
Yesterday, the S&P 500 closed a little lower having
earlier attempted to break into fresh record territory. Europe was mixed: the
FTSE 100 closed up 0.2% at 7540, while the DAX was down 0.5% at
On Thursday, Asia has also retreated a touch from an
18-month high. Data is offering little in the way of a catalyst and with a
trade deal baked in, further upside may be tricky in 2019 as traders book
profits and start to focus on Jan 2020.
European markets are set to open flat as investors weigh
the balance of risks and probably start to think that now might be a good time
to park some profits.
Overnight, China’s finance ministry has set out six
products from the United States that will be exempt from tariffs starting Dec.
26th. Across the wires as I write China says it is close communication with the
US on singing the phase one deal and that details of the deal
would outlined once it is signed.
Australian jobs data was strong at +39.9k vs 14.5k expected
and a big turnaround from the prior month. Just a little bit of help for the
Aussie, which has risen steadily overnight. AUDUSD based at 0.6850 late last
night and has marched through to 0.68825.
Elsewhere, US yields are higher, with 10s striking 1.927%.
The dollar index also advanced. The combination is troublesome for gold bugs –
gold has trended sideways now for days and seems locked around $1477. Oil got a
boost from the US inventory data, with a spike towards $61 from $60.30 just
about holding at $60.85. Inventories showed a draw of 1.1m barrels vs 1.5m